Investors Say CBN Has Grown Tired Of Defending Its Forex Policies

The roadshow taking Nigeria’s top finance representatives to four cities in the United Kingdom and the United States of America was supposed to be the selling of the upcoming $1 billion debt bonds that the country is offering for the first time in 4 years. However, a standout fact from the first leg was that the Central Bank of Nigeria has grown tired of having to defend its forex policies and is doing its best to avoid answering questions about the Naira. And potential investors are aware of this.

Kevin Daly, a money manager who helps oversee about $11 billion of developing-nation assets for Aberdeen Asset Management Ltd. in London said:

“My takeaway from the meetings is that they’re going to hold the line on the naira,” Daly said. “They didn’t promise anything concrete. They said they were working on fine-tuning the foreign-exchange system. But what does fine-tuning mean? It’s clear they’re getting tired of answering questions about the naira.”

Similar views were expressed by other potential investors who are skeptical that the central bank is again holding the naira steady through an array of trading rules, making it difficult to assess whether their funds would be used to defend the currency instead of being spent on infrastructure.

“The foreign-exchange policy is the elephant in the room. They didn’t address it. The fact they’re doing the Eurobond before addressing it is a sign that the foreign-exchange policy won’t improve quickly.” said Oliver Weeks, who attended for Emso Asset Management Ltd., which manages about $3.5 billion of emerging-market bonds.

The country’s Finance Minister as well as other top officials have on earlier occasions had to explain the intricacies involved in letting the Naira free-float, with minimal success. For example, Finance Minister Kemi Adeosun had earlier said that allowing a free float would be ‘difficult’ since it may lead to an increase in the price of gasoline, almost all of which Nigeria imports, a situation deemed entirely unacceptable by the populace.”